Ending of Wendy's Dispute with Franchisee Results in Net Loss for Quarter

Wendy’s recently ended its years-long altercation with DavCo Restaurants, a franchisee since 1976, by buying 140 of its units, terminating their relationship. The dispute stemmed from DavCo's refusal to remodel and adopt a new POS system, saying it couldn't afford to do the remodeling and that the POS system was inoperable. Wendy's sold the 140 locations it had just bought to franchisee NPC International, which made NPC Wendy’s largest franchisee. The transactions resulted in Wendy's reporting a net loss for the quarter.

“Due to the unique nature of the transactions, the Company incurred a total pre-tax loss of $43.1m and a net cash outflow, exclusive of franchise fees received, of $17.8m,” Wendy’s said in a release announcing its performance for the quarter ended July 2, 2017.

…Wendy’s also continued its “Buy and Flips” program in which it facilitates franchisee-to-franchisee restau rant transfers. During the 2nd quarter, 294 restaurants changed hands from one franchisee to another, including the DavCo-NPC transaction.

Wendy’s said the program was being carried out “to ensure that restaurants are operated by well-capitalized franchisees that are committed to long-term growth.” — Bret Thorn, Nation's Restaurant News